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Polycom, Inc. (PLCM) is scheduled to release its fourth quarter 2011 results on Monday, January 23, after the closing bell. The current Zacks Consensus Estimate for the fourth quarter is pegged at 21 cents, representing an annualized growth of 2.5%.

With respect to earnings surprises over the trailing four quarters, Polycom missed the Zacks Consensus Estimate in two of the last four quarters but surpassed the same in the remaining two with an average earnings surprise of 4.59%.

Third Quarter Recap

On October 19, 2011, Polycom reported its third quarter 2011 financial results. Total revenue in the third quarter of 2011 was approximately $379 million, up 23% year over year, but below the Zacks Consensus Estimate of $388 million. The year-over-year increase in revenue was mainly due to growing sales in the U.S. Federal markets and several emerging economies, partially offset by lower sales of big businesses.

GAAP net income in the third quarter was $23.7 million or 13 cents per share compared with $17.3 million or 10 cents per share in the prior-year quarter. However, adjusted (excluding special items) EPS in the reported quarter was 16 cents; considerably lower than the Zacks Consensus Estimate of 21 cents.

Gross margin in the reported quarter was 59.8% compared with 59.3% in the year-ago quarter. Quarterly operating margin was 7.8% compared with 7.5% in the year-ago quarter.

Agreement of Estimate Revisions

In the last 30 days, out of the eight analysts covering the stock, none increased or decreased their estimates for the fourth quarter of 2011. Likewise, for the first quarter of fiscal 2012, out of the seven analysts, none raised or slashed their estimates for the same period.

For fiscal 2011, in the last 30 days, out of the eight analysts covering the stock, none increased or decreased their estimates for the quarter. Similarly, for fiscal 2012, out of the 7 analysts covering the stock, none of the analysts raised their estimates or reduced the same for the given period.

Magnitude of Estimate Revisions

During the last 30 days, the current Zacks Consensus Estimates for both the ongoing quarter and the first quarter of 2012 were in line with the previous estimate of 21 cents. Similarly, for fiscal 2011 and 2012, the current Zacks Consensus Estimates were at par with the previous estimates of 76 cents and 92 cents, respectively.

Earning Surprises

The current Zacks Consensus Estimates for both the ongoing quarter and the next quarter reflects a 0.00% upside potential (essentially a proxy for future earning surprises), respectively. Similarly, fiscal 2011 and 2012 holds an upside potential of 0.00%, respectively.

Our Recommendation

Polycom is well positioned financially to pursue its future ventures. Increased demand for video-conferencing services, mainly from India and China coupled with overall improvement of marketing and sales service will boost the company’s market share. The company has recently collaborated with International Business Machines (NYSE:IBM) to develop enhanced video conferencing application for smartphones and tablets, thereby creating huge growth opportunityfor the company going forward.We, thus, maintain our long-term Outperform recommendation for Polycom, Inc.

Currently, Polycom, Inc.has a Zacks #3 Rank, implying a short-term Hold rating.

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Source: Polycom: Earnings Preview